Have changes in the financial structure affected bank profitability? Evidence for Austria

Abstract

We examine the impact of changes in the financial structure of the Austrian banking sector over the past 15 years, such as disintermediation, internationalization and privatization, on the profitability of banks. Several proxies based on bank balance sheet data at the micro-level as well as macroeconomic variables are used to capture these changes. The case of Austria is particularly interesting because the opening up of the Austrian banking sector due to EU accession and the strong engagement of Austrian banks in Eastern Europe coincided with the global trend toward deregulation of banking activities. Our estimation results, which are based on dynamic panel regression methods, indicate that disintermediation (a lower percentage of loans over total assets) and higher market concentration in the banking sector had a positive effect on bank profitability, while changes in the ownership structure (privatization and increased foreign ownership) as well as more foreign lending by Austrian banks did not have a clear-cut or significant impact on bank profits.

Loan efficiency in the Visegrad countries

“…We therefore assumed that banks with a higher loan-to-asset ratio (higher liquidity risk) have a lower efficiency. The existence of a negative relationship was described, for example, in the works of Hassan -Bashir (2003) and Rumler -Waschiczek (2012).…”

Bank Profitability and Macroeconomy: Evidence From Lithuania

“…In theory, the expected relationship between the capital adequacy ratio and returns should be negative as a high capital adequacy ratio signalizes that bank is operating overcautiously and ignoring potentially profitable transactions. An empirically negative relationship has been determined by Goddard et al (2010) and Rumler and Waschiczek (2012). On the contrary, Demirguc-Kunt and Huizinga (1999), Abreu and Mendes (2002), Pasiouras and Kosmidou (2007), García-Herrero et al (2009) took another measure of bank capitalization, i.e.…”

“…Cross-country panel data sets have been investigated by Molyneux and Thornton (1992), Demirguc-Kunt and Huizinga (1999), Abreu and Mendes (2002), Goddard et al (2004), Pasiouras and Kosmidou (2007), Albertazzi andGambacorta (2009), Goddard et al (2010), Lee and Hsieh (2013), Shehzad et al (2013), Gambacorta et al (2014), Dietrich and Wanzenried (2014). Examples of single countries' analysis are studies of Andersen et al (2008), Athanasoglou et al (2008), Apergis (2009), García-Herrero et al (2009), Coffinet and Lin (2010, Wanzenried (2011), Sufian (2011), Kanas et al (2012), Rumler and Waschiczek (2012), Trujillo-Ponce (2013), Berlemann et al (2014), Perman et al (2015), Chronopoulos et al (2015). Certainly, the empirical results of the above mentioned studies vary as time periods, data sets, examined environments and countries differ.…”

“…Furthermore, many authors used some measure of interest rates in their researches. Demirguc-Kunt and Huizinga (1999), Abreu and Mendes (2002), García-Herrero et al (2009) used the short-term interest rate, Albertazzi and Gambacorta (2009) used the longterm interest rate, Coffinet and Lin (2010), Dietrich and Wanzenried (2011) and Rumler and Waschiczek (2012) used the interest rate spread, i.e. the difference between long-term and short-term interest rates.…”

“…Pasiouras and Kosmidou (2007), Albertazzi and Gambacorta (2009), Wanzenried (2011, 2014), Rumler and Waschiczek (2012) among others used the annual GDP growth rate to link business cycle and bank earnings. Athanasoglou et al (2008), Apergis (2009) and Kanas et al (2012) used output gat as a measure of business cycle.…”